Project Report on KURKURE & POTATO CHIPS

PROJECT REPORT
ON
KURKURE & POTATO CHIPS

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LIST OF CHAPTERS

SL. NO. ITEMS PAGE NO.

1. THE PROJECT AT A GLANCE 04

2. INTRODUCTION 05

3. PROJECT DESCRIPTION 07

4. MARKET PROSPECT 08

5. TECHNOLOGICAL PROCESS 09

6. QUALITY CONTROL AND STANDARDS 11

7. CONSUMABLES, POWER AND UTILITY 12

8. INSTALLED CAPACITY 13

9. BASIS AND PRESUMPTIONS 14

10. PROJECT COST ESTIMATES AND 15

MEANS OF FINANCE

11. ECONOMIC VIABILITY AND FINANCIAL 17

ANALYSIS

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LIST OF ANNEXURES

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CHAPTER-1
THE PROJECT AT A GLANCE

Sl. Particulars Description

No.
A. Project Description
1. Proposed Project Potato and Banana Chips Making Unit
2. Capacity of the Plant/Unit (At  Kurkure: 800 Ton
100% Capacity)  Potato Chips: 300 Ton
Total : 1100 Ton

3. Year-wise Capacity Utilisation Yr 01 Yr 02 Yr03 Yr 04 Yr 05

40% 50% 60% 70% 70%
B. Project Cost
1. Land Rented
2. Civil Works & Buildings Rented
3. Plant & Machinery Rs. 1,70,00,000.00
4. Pre-operative Expenses Rs, 2,00,000.00
5. Margin for Working Capital Rs. 46,99,600.00
6.
7.
Total Rs. 2,50,00,000.00
C. Means of Finance
1. Equity @ 25% Rs. 50,00,000.00
2. Loan from Bank @ 75% Rs. 2,00,00,000.00
Total Rs. 2,50,00,000.00
D. Financial Benchmarks
1. Break Even Point(at 31.36%
Operating
Capacity on Third Year)
2. Average DSCR 2.52
3. Internal Rate of Return 18.00%
E. Basic Assumptions
1. Power Rate Per Unit Rs. 13.00/- Per Unit
2. Interest Rate Term Loan: 10.5%; WC Loan: 12.5%
3. Repayment Period 6 Years including moratorium period of 1 Year.

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CHAPTER-2

INTRODUCTION

2.1. kurkure and Potato chips are popular processed food items resulting in substantial
value-addition. Chips are crispy, salty or spicy and consumers prefer fresh quality.
Chips are the most popular variety of snacks and they are consumed round the year by
people of all age groups and all income segments. Kurkure has become the perfect
Namkeen snack of the nation. Embodying the spirit of our lovable country, this tedha
shaped snack has found a home in the hearts and minds of all. Inimitable taste
coupled with superior quality has made it the choice of millions and an inevitable part
of their families. Little wonder that it is one of India’s most loved snack food
brands.The food market can enjoy with this generation those really do not know about
the product.But, Kurkure come different approach to consumers of this generation
from the older generation.From that we can prove for every product, understanding
the consumer behavior and develop the product are major reasons for its success. It
maintains the balance between children and parents.Because of no of flavors it can
with stand as leading food product than the other competitors .
2.2. Potato is an important crop among the horticultural crops in the North Eastern region
of India. The state of Assam has the maximum area and production under Potato crop
within the North East. The highest productivity of this crop in the NEH region is in
Tripura. It is estimated that 25% of the Potatoes, which are spoiled due to various
reasons such as transportation, type of packing, non-availability of cold storage
capacities during harvesting season, glut in the market etc., could be saved by making
various preserved Potato products. Potato Chips is one of such value added products
which has a great potential as this is considered as one of the traditional foods of
India.
2.3. POTATO is a very popular fruit due to its low price and high nutritive value.
POTATO contains about 20% sugar and reasonable amount of Vitamins A, B and C.
This is considered to be a rich source of energy producing food. It is consumed in
several forms and amongst many value added preparations, POTATO Chips is
considered to be the most important item.
2.4. Considering the potential market opportunity of such units, the present detail project
report has been developed. The main objective of such initiative is to productively
utilize the abundantly available resources of the local area and to enable uninterrupted
supply of the products to market throughout the year.
2.6.1. A detailed analysis has been carried out considering mainly the aspects below:

2.6.2. Market and demand of the products.

2.6.3. Requirements of miscellaneous assets for the project.

2.6.4. Estimation of installed capacity and operation pattern.

2.6.5. Consumables, power & utilities and manpower requirements etc.

2.6.6. Estimation of the cost of the project and working capital requirements.

2.6.7. Means of Finance

2.6.8. Estimation of cost of operation, profitability and fund flow statements etc.
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2.6.9. Implementation Schedule.

2.6.10. The total Project cost is estimated at Rs. 200.00 Lakhs which includes margin money
for working capital @ 25%.

2.6.11. The various profitability estimates and other financial indicators worked out as given
in the following pages are up to the satisfaction level.

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PROJECT DESCRIPTION

3.1. The proposed project is that of setting up of a Kurkure and Potato Chips making unit
at suitable location.

3.2. The key products of the proposed project are as follows;

 
 Kurkure
 
POTATO Chips

3.3. Chips are very popular amongst all age groups and they are made from various
materials. This industry is very large and is dominated mainly by local manufacturers.
Easy availability, freshness and competitive price are the main features. These
products can be made anywhere, where there are availability of raw material without
much difficulty.

3.4. The proposed project would procure the raw materials from the farm level available
locally. After processing, the products would be supplied to the market through
distributors/ wholesalers/retailers.

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CHAPTER-4

MARKET PROSPECT

4.1. The popularity of snack foods is growing high day by day and KURKURE &
POTATO CHIPS have emerged as a potential snack food. There exists a very large
market for chips and they can be sold at various retail outlets, Paan shops, bus-stands,
railway stations, roadside eateries etc. The major market outlets are the “A” and “ B”
class outlets, departmental stores, super markets and self service counters. There also
exists institutional market consisting of clubs and other institutions, school & college
canteens, army establishments, bars & pubs, railway and airlines caterers etc.
Competition from organised sector may be there but local and small units have
distinct advantages in terms of less overheads, lower transportation costs, longer shelf
life, quick access to market and economy in terms of cost.

4.2. Market Promotion plays a vital role for the generation of the potential customers
therefore, application of marketing strategies are recommended. Marketing plan of the
proposed project may include good quality maintenance, promotional campaign like
offering special discounts, referrals, advertisement and tying up with buying houses.

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CHAPTER-5
TECHNOLOGICAL PROCESS

5.1. The process flow diagram for Potato Chips is as follows:

RAW MATERIAL

WASHING/SORTING/PEELING OF POTATOES AND POTATOS

SLICING/CUTTING

WASHING AND DRYING

FRYING

SEASONING

PACKAGING

STORING/LOADING/SUPPLY

5.2. POTATO Chips :The raw POTATO is first washed thoroughly to remove any
adhering dirt or sand. The skin is peeled manually and the fruit is sliced with slice
thickness ranging from 1.8 mm to 2.5 mm. The POTATOs thus prepared are then
dipped in brine water to avoid oxidation. Sometimes turmeric powder is also used for
colouring the POTATO chips or to improve colour. The POTATO chips are fried in
vegetable oil and cooled down to the room temperature. These chips are then packed
in polythene bags of suitable gauze and sizes to prevent spoilage.

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5.3. The process flow diagram for Kurkureis as follows:

RAW MATERIAL

EXTRUSION PROCESS

SEASONING

PACKAGING

STORING/LOADING/SUPPLY

The extrusion process is the base for Kurkure production process. The fully automatic
production process begins with the procurement of raw material; Cornmeal,
Grammeal, and spice mix masala seasonings. The procurement of raw material
depends on the quality parameters set by PepsiCo Global Standard for Safety
and Quality. In addition to this, the sample goes through the quality control lab
and then the process starts. Production begins by blending meal i.e. rice, corn,
and gram at a certain ratio with an addition of water.
Extrusion of the blended meal begins by passing through an apparatus called Extruder. In the
extruder, the raw materials are pressed through a die using high-pressure build-up by the screw
and high temperature created by shear between sleeve and screw. The pressure drop at the die
causes the snack to expand and the face cutters set the desired snack length and mass.
After extrusion, the frying process begins in fryer using edible oil for extra crispness and for shelf-
life. Further Spice mix seasonings sprinkled throughout the batch through seasoning tumbler.
Now the product is ready for packaging. In addition to this, metal detector scans the final product
to look for foreign particles.

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CHAPTER-6

QUALITY CONTROL AND STANDARDS

6.1. Following specifications under Bureau of Indian Standard related to processing of

such products may be referred:

IS: 4626-1978

IS: 2860-1964

IS: 7254-1974

6.2. FSSAI LICENSE:FSSAI License is issued by the Food Safety and Standards
Authority of India (FSSAI), Ministry of Family Health & Welfare, Government of
India. Application to commence a food business must be made to the FSSAI in the
prescribed format. Based on the application and supporting documents, FSSAI will
accord approval. The Food Safety and Standards (Licensing and Registration of Food
Businesses) Regulations 2011introduced to improve the hygiene and quality of food
has brought about tremendous changes in the food industry. As per the Act, no person
shall commence or carry on any food business except under a FSSAI license or
FSSAI registration. Therefore, any food manufacturing or processing or packaging or
distributing entity is now required to obtain a FSSAI License or Registration.

6.3. POLLTUION CONTROL: There is no major pollution problem associated with this
project in terms of air and sound pollution except for disposal of waste water which
would be managed appropriately through recycling facility. However, entrepreneur
should obtain NOC from concerned State Pollution Control Board.

6.4. EFFLUENT DISPOSAL: Disposal of any effluent out of the project unit should be
treated with recycling facility or dumped in such a way that these does not cause
hazard in the vicinity of the site.

6.5. ENERGY CONSERVATION: Proper care should be taken in order to use

appropriate amount of fuel and electricity.

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CHAPTER-7

CONSUMABLES, POWER AND UTILITY

7.1. The major consumables required are as follows;

1. Potato , Corn Rice

2. Edible Oil, Salt, Spices and Flavours

3. Packaging Materials.

7.2. POWER:

The total requirement of power for the project is 30.00 KW. The total power supply would
be distributed in the following way;

Plant & Machinery - 30.00 KW

The details requirement is shown in ANNEXURE-V.

7.3. UTILITY:

WATER: Constant flow of water would be necessary in the operation of the plant. Water
would be obtained from bore well and can be stored in an overhead tank, from where it
will be supplied to the required areas. Process water should be free of mud and suspended
particles. It should be available at a pressure of 3 Kg/sq.cm.

OTHER UTILITIES: Other utilities includes fuel etc. those should be locally available.
Detail expenditure against the head is shown in Appendix- C2.

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CHAPTER-8

INSTALLED CAPACITY

8.1. In assessing the proposed plant capacity, due consideration has been given to
technological and financial factors, marketing considerations, availability of
consumables, infrastructure facilities and economic viability. The detailed
requirement of the plant and machineries to achieve the plant capacity is assessed by
the unit technician. While arriving at the requirement of various type of equipment
and machinery required for the unit, due considerations has been given to the
following points.

a) Minimum Wastage
b) High Productivity
c) Maximum flexibility in operation
d) Adequate stock by provision wherever necessary

The installed production capacity of the unit per hour is as follows;

Kurkure - 800 Kgs/hour

Potato Chips - 300 kgs/hour

For the purpose of carrying out this economic viability of the proposed project, it is
assumed that the plant will operate at following efficiencies during the first 5(Five)
years.

Year 01 02 03 04 05

Capacity 40% 50% 60% 70% 70%

Utilization

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CHAPTER-9

BASIS AND PRESUMPTIONS

While deriving figures and projections in this Project report, following Basis and
Presumptions have been made.

9.1. The project is based on a single shift basis and 300 days of working schedule in a
year, working for 8 hours a day, 25 days a month.

9.2. The project cost and other projections etc. have been made on present market
conditions and the sources available within our sources only and therefore it may vary
on account of market fluctuations and with different suppliers and qualities.

9.3. The cost of machinery and equipment/materials indicated refer to a particular make
and the prices are approximate to these prevailing at the time of preparation of this
report.

9.4. Power rate is assumed at Rs.13.00 per unit and monthly fixed rental charges.

9.5. Water would be made available through bore well facility at the project site.

9.6. Manpower requirement for the project has been planned considering the size of the
unit.

9.7. Interest rates considered is 10.5% on term loan and 12.50% on Working capital loan
for financial assistance.

9.8. For repayment, a period of 6 years is planned with moratorium period of one year.

9.9. Insurance charges have been considered Lump Sum.

9.10. Repair and maintenance have been calculated at reasonably.

9.11. Depreciation shown has been calculated on Straight Line Method.

9.12. Non-refundable deposits, Preparation of detailed project report fees, Architecture fees,
traveling & Convenience amount, Know-how & Engineering fees, Application
processing fees, trial production, fees etc are considered under pre-operative
expenses.

9.13. Break Even Point & Rate of Return is calculated on optimum production condition
findings.

9.14. At the plant site, availability of unskilled labour is not a problem. Skilled and
unskilled labour can be recruited for operating the plant. Initial training will be
required for smooth and efficient running of the plant. It is felt that the skilled
manpower available locally having some experience in operation can be recruited to
satisfy the manpower need.

9.15. Project would be set up at a site that is well connected by road and there is adequate
supply of power and water.

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CHAPTER-10

PROJECT COST ESTIMATES AND MEANS OF FINANCE

10.1. TOTAL PROJECT COST:

The Capital cost of the project has been estimated on the basis of installed capacity
assuming 200 working days per annum. The total cost of the Project including margin
for working capital has been estimated at Rs. 200.00 Lakhs as detailed in
ANNEXURE-X.

10.2. LAND, BUILDING AND CIVIL WORKS:

Land & Building is on Rent @ 1.80. Laks per month.

10.3. PLANT & MACHINERY:

The total cost of Plant & Machinery has been estimated at Rs.202.00 laks as detailed
in ANNEXURE-III.

10.4. PLANT EXPENDITURE:

The total cost on Plant expenditure includes admissible taxes, transportation,

insurance of the machineries and installation etc. has been included as detailed in
ANNEXURE-III.

10.5. FIXED ASSET:

10.6. PRELIMINARY & PRE-OPERATIVE EXPENDITURE:

An expenditure of Rs. 2.00 Laks has been earmarked on this account, as detailed in
Appendix- A4.

10.7. CONTINGENCY AND ESCALATION:

10.8. WORKING CAPITAL ESTIMATES:

The details of the Working Capital requirements of the proposed unit have been
shown in ANNEXURE-X. In arriving at the working capital estimates, various
components vis Administrative Expenses/Consumables and Working Expenses have
been taken on the basis of usual norms. The Working Capital requirement is proposed
to be met from project margin money and cash credit loan borrowings from the
financial institution.
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10.9. MEANS OF FINANCE:

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The Proposed Project Cost of Rs. 250.00 Lakhs would be financed under MSME
development schemes of financial institutions/commercial banks, in the following
manner as shown below.

1. LOAN FROM BANK/FI @ 80% = 200.00 LAKHS

2. PROMOTERS CONSTRIBUTION @ 20% = 50.00 LAKHS

TOTAL = 250.00 LAKHS

10.10. DEBT-EQUITY RATIO:

Based on the above financing pattern, the Debt-Equity ratio of the Project is 5:1.

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CHAPTER-11

ECONOMIC VIABILITY
AND
FINANCIAL ANALYSIS

11.1. COST OF PRODUCTION:

The cost of production has been estimated annually for the first five years of
operation. The various cost components taken into account are cost of administrative
expenses, consumable stores, utilities, wages and salaries, repairs and maintenance,
insurance, interest rates, taxes etc. depreciation. The detailed cost of production has
been shown in ANNEXURE-I.

11.2. REPAIR & MAINTENANCE:

Cost under Repair and Maintenance expenses have been assessed by charging 5% on
Machineries as detailed in ANNEXURE-VIII.

11.3. ADMINISTRATIVE EXPENSES:

This has been considered in the cost and profitability statement under other expenses
etc.

11.4. SELLING EXPENSES:

This has been considered in the cost and profitability statement under other expenses
etc.

11.5. DEPRECIATION:

In calculating the cost of operation, depreciation has been calculated under straight
line method after absorbing the pre-operative and contingencies expenses as shown in
ANNEXURE-XII.

11.6. FINANCIAL CHARGES:

The interest on proposed term loan amount of Rs. 16.56 Lakhs has been calculated@
10.5% being the rate of interest. The interest calculation for various years after
considering the repayments due in respective years has been shown in ANNEXURE-
XI .

11.7. SALES REALISATION:

The total annual income of the Project is shown in ANNEXURE-IX. Based on 40%
capacity utilisation, total turnover is estimated at Rs. 1710.07 Lakhs on First year,
the sale for other years are estimated at different capacity utilisation as shown in
ANNEXURE-IX.

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11.8. NET PROFIT:

The proposed project is expected to generate profit from the first year of operation
itself and will gradually increase with increase in capacity utilisation.

11.9. INTERNAL ACCRUALS:

The net profit after tax with depreciation added back would make up sufficient
internal accruals to meet the term loan, working capital loan repayment obligations
without any liquidity problems.

11.10. FINANCIAL ANALYSIS:

The break-even point of the proposed project is 31.36% at 40% operating capacity on
third year as shown in Annexure-XVI.

The DSCR of the project has been worked out in Annexure-XVIX with an average
of 2.34, which is considered quite satisfactory to meet the repayment and interest
obligations in respect of the term loan.

The internal rate of return of the project works out to 18.00 %, which is
satisfactory.

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